Behind the Management Shake-Up at Financial Firm LPL

Outsiders said such changes in management were to be expected in a company that has evolved over the past decade from a closely held, private firm to a publicly traded company with a market capitalization of $4 billion.

LPL Financial LLC's recent management changes will allow the financial-advisement firm to concentrate on a pressing need and potential growth engine: training and establishing young financial advisers to fill hundreds of jobs and positions at banks and credit unions.

LPL Financial said April 18 that it is moving its president and one of its old guard, Esther Stearns, out to head a new subsidiary. The publicly traded company is promoting a more recent executive hire, current chief financial officer Robert Moore, to replace her.

Stearns, meanwhile, will become CEO of a new subsidiary, "LPL New Venture," which will focus on registered reps and financial advisers new to the industry and dedicated to serving clients in the mass market. The changes are effective May 1.

Mark Casady, CEO and chairman of LPL, said in an interview April 20 that LPL's torrid growth over the past decade made the changes and expansion of the firm's management necessary.

"When I joined the firm 10 years ago, we had 700 employees, and we now have 3,000," he said. "You need a much bigger team to manage that."

"You can't have an old guard and a new guard," he said, "You need everyone together."

Casady said that Stearns and another long-time LPL employee and former head of marketing, Kandis Bates, are "very excited to get the new venture off the ground." Joan Khoury, a former Bank of America executive, was named the chief marketing officer in February. She reports directly to Moore.

Casady acknowledged that typical training programs at behemoths such as Merrill Lynch and Morgan Stanley were very expensive and focused on creating brokers who were employees rather than independent contractors, such as LPL works with.

"We've spent last 18 months trying to do this in a much different mode," he said. "I won't reveal the secret sauce, but in a matter of months, [the new advisers] will have a place to go."

He said that banks and credit unions, in particular, want to expand their offerings of securities products. "There are more open positions for advisers there, and they need more bodies," he said. He estimated that there were "a couple of hundred" such positions LPL could immediately fill with new brokers.

Outsiders said such changes in management were to be expected in a company that has evolved over the past decade from a closely held, private firm to a publicly traded company with a market capitalization of $4 billion.

Moore is "exactly the right man for the job," said Brad Hintz, a longtime securities industry analyst now with Sanford C. Bernstein. "He has a face the institutional community is very comfortable with. And LPL has aspirations to ultimately take on Charles Schwab on the RIA side."

Bill Dwyer, another long-term executive at LPL and currently president of national sales, is also seeing his responsibilities shifted at the firm. Along with his current duties, Dwyer will now be responsible for oversight of the firm's relationships with product sponsors.

Casady said that Dwyer will take some of the burden from his shoulders and now focus on lobbying efforts on behalf of the company in Washington.

"Some of our biggest threats are in Washington," Casady said. "I've spent a lot of my time doing this, and now Bill is taking my place."

Stearns has been with LPL since 1996 and has played a sizeable role in its transition from a privately held independent broker-dealer to a publicly traded company with close to 13,000 independent reps and financial advisers.

Moore, meanwhile, joined LPL in 2008, three years after the firm was acquired by two private equity managers. Those managers, Hellman & Friedman and Texas Pacific Group, led LPL through several acquisitions of smaller broker-dealers, eventually doubling the number of LPL reps and advisers before its IPO in November 2010.